IRS Pays $11 Billion in Advance Premium Assistance Tax Credits

The Treasury Inspector General for Tax Administration (TIGTA) has released its interim report on the IRS’s administration of premium tax credit claims during the 2015 filing season. In the report, TIGTA reviewed the IRS Code Sec. 36B premium assistance tax credit (PTC). TIGTA reported that the IRS made almost $11 billion in advance payments of the PTC to insurers in fiscal year (FY) 2014.

Payments. The PTC credit is available to qualified taxpayers who obtain health insurance through the health insurance marketplace (also known as exchanges) under the Patient Protection and Affordable Care Act (ACA). Taxpayers may elect to have the PTC paid directly to their health insurance provider as partial payment for their monthly premiums, referred to as the advance premium tax credit (APTC), or receive the PTC as a lump sum credit on their annual federal income tax return. As of March 26, 2015, the IRS had processed nearly 1.4 million tax returns that reported approximately $4.4 billion in PTCs (which were either received in advance or claimed at the time of filing). Taxpayers claimed more than $240 million in additional PTCs and reported receiving more than $572 million in excess APTC payments.

TIGTA’s review. During the FY 2014 health insurance enrollment period, the District of Columbia and 14 states operated their own exchanges, while the remaining 36 states partnered with the federal exchange. The IRS anticipated the first Exchange Periodic Data (EDP) submission would be received in June 2014. However, it did not receive all required enrollment data from the exchanges prior to the January 20, 2015, TIGTA found. For example, the IRS did not receive EDP for approximately 1.7 million (40 percent) of the approximately 4.2 million federal exchange enrollment records and did not receive the EDP from six of the 15 state exchanges. Because of incomplete and unreported data from the exchanges, the IRS was unable to ensure that taxpayers claiming the PTC purchased insurance through an exchange and properly reconciled APTCs received. TIGTA found that 79 of the 80 reject code conditions and 16 of the 20 PTC error codes, the processes developed by the IRS to identify erroneous PTC claims, were working as intended. However, computer programming errors resulted in the reject and PTC error codes not always identifying tax returns with the particular error condition. The IRS planned to make programming corrections. TIGTA prepared this interim report for information only and no recommendations were made.

SOURCE: TIGTA Report, No. 2015-43-057, released September 2, 2015.

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